### 2 Attachments

The analysis presented in Table 4-10 (which include s a typo –Total water deliveries in 2011 are 1.55 M not $1.55 M) assumes that the increase in the CAP pumping ene rgy charge would persist over the term of the hypothetical CAWCD bonds used to pay for the federal share of th e SCR installation. For our analysis, we assumed 2 0 year bonds (p 59). The bond payments would increase the pumping energy charge for CAWCD, which would pass o n this increase cost to CAP water customers until the bonds were paid down.

If you have any other questions, let me know.

Dave

David Peterson National Renewable Energy Laboratory Deployment & Market Transformation Integrated Applications 1617 Cole Blvd, MS-RSF401 Golden, CO 80401

Phone: 303-275-3615



### RE: Questions for NREL from EPA Contractor Peterson, Dave

to: Hurlbut, David, Colleen McKaughan, Haase, Scott
04/18/2012 10:35 AM
Cc: Anita Lee, Eugene Chen
Hide Details From: "Peterson, Dave" <David.Peterson@nrel.gov>

To: "Hurlbut, David" <David.Hurlbut@nrel.gov>, Coll een McKaughan/R9/USEPA/US@EPA, "Haase, Scott" <Scott.Ha ase@nrel.gov>

Cc: Anita Lee/R9/USEPA/US@EPA, Eugene Chen/R9/USEPA /US@EPA

History: This message has been replied to and forwa rded.

image001.png image002.png 

### Page 1 of 3

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...From: Hurlbut, David

Sent: Wednesday, April 18, 2012 10:27 AM
To: Colleen McKaughan; Haase, Scott
Cc: Anita Lee; Eugene Chen; Peterson, Dave Subject: Re: Questions for NREL from EPA Contractor

Nice to hear from you, Colleen.

 The SCR and SCR+ scenarios generally assume a flat 20 year period for amortizing initial fixed costs ( capital plus installation). Table 1-12 includes estimates based on a 10-year recovery.

 LNB/SOFA were treated as existing plant in service. These costs are already in rate base, so all of ou r estimates of cost impacts treat LNB/SOFA as part of the curre nt baseline, not as a potential change case.

 The discount rates we used are shown in table 1-10. All are WACC provided by the utility, except for S RP which added what they refer to as a "risk premium" on top of their WACC. They would not provide a simple WAC C, nor could we find one. For CAWCD, we used an approx imation based on the current rate paid on municipal

revenue bonds in Arizona. I'll ask Dave Peterson to weigh in on the fourth qu estion. But honestly, both Reclamation and CAWCD we re somewhat stumped about how they'd pay for the US share of co sts. Lacking better guidance from them, we assumed the simplest reasonable approach that didn't depend on federal appropriation: issuing revenue bonds. So th ose estimates would be stable within the range shown in table 4-1 0, apart from any cost unrelated to BART. I can't s ay offhand whether revenues from excess power sales would affe ct the pumping charge; Dave Peterson might be able to shed some light on that.

I hope this helps.

David Hurlbut, Ph.D.
Economist Strategic Energy Analysis Center National Renewable Energy Laboratory
303-384-7334



### From: Colleen McKaughan < McKaughan.Colleen@epamail.epa.gov >

Date: Tue, 17 Apr 2012 18:06:40 -0600

To: "Haase, Scott" < Scott.Haase@nrel.gov >, David Hurlbut < david.hurlbut@nrel.gov >

Cc: Anita Lee < Lee.Anita@epamail.epa.gov >, Eugene Chen < Chen.Eugene@epamail.epa.gov > Subject: Questions for NREL from EPA Contractor

Hi, Scott and David, 

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...Our contractor has four questions that he was hopin g that NREL could answer. Would you be willing to respondto

the questions below? We are fine with getting a re sponse via email, or getting on the phone with you if you feel that that would be the better approach. I have cop ied Anita Lee and Eugene Chen on this email. I will be out of the office from 4/20 - 4/30, so if you could reply to all of us that will keep things moving even whil e I'm out. Thank you in advance for your assistance.

Colleen W. McKaughan Associate Director, Air Division USEPA, Region 9 (520) 498-0118

1. In NREL’s approach to estimating cost impacts of the SCR or SCR/baghouseinvestments, how were SCR and SCR + Baghouse capital expense applied with respect to ti ming (e.g years of installation/years of cost reali zation & cost recovery)?

3. In NREL’s development of baseline pla nt costs, how were the recent LNB/SOFA investments incorporated into existing plant cost?

7. NREL’s report indicates the use of a discount factor reflective of the various NGS utili ties’ cost of capital. Two
questions: (a). Did the discount factor for each owner represe nt a weighted average cost of capital, WACC, (costs of debt & equity)? (b). What rates did NREL assume for each owner’s sp ecific WACC calculation?

12. Does NREL anticipate that the increase in the CAP pumping energy charge in Table4-10 woul d persist over time at

the Table 4-10 level? 

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